In our latest installment of TRENDING, we take a closer look at what Apple hopes to achieve with their recent acquisition of Beats by Dre.
In the wake of Apple‘s big “Beats by Dre” announcement, pundits, experts and laymen alike have speculated that the acquisition, a mere 2% of Apple’s liquid capital at $3.2 billion, is a bit of a cultural hail mary. The move is designed to simultaneously negate the possibility of Beats’ streaming service taking off as well as, in some intangible manner, make the company “cool” again post-Steve Jobs. With Apple reportedly having around $137 billion in the bank, the purchase isn’t a tremendous risk for the computer giant, but it does represent a foray into a new world for the leviathan of Cupertino: fashion.
Apple headphones are notoriously fickle. They also look and feel surprisingly cheap. For a brand that has commoditized previously unheard-of products to a borderline ridiculous degree, Apple decidedly missed an opportunity to capitalize on its own headphones as an “it” accessory. Beats has done just the opposite – immersed technologically unimpressive, often gaudy but premium-feeling product in a cult of celebrity from the realms of hip hop, professional sports, Top 40 pop, EDM and more. In the process, it has transformed an iPhone accessory into a fashion statement, bringing affordable luxury to the masses.
Running under the surface of the great Apple-Beats acquisition conversation is the arrival of ex-Burberry CEO Angela Ahrendts in California. Her job, simply put, is to save the Apple Store on its 13th anniversary (which happens to be today). Despite helping a hugely successful retail operation, Apple’s store income “hit $5.227 billion in Q2 14, down 25% on the traditionally super-strong first quarter but flat on a year-on-year basis.” The model is stagnant. The once-pristine, temple-like retail formula that Apple helped to invent now feels outdated. There’s a riddle that needs to be solved in order to bring Apple into the global 21st century. The most startling part about all of this is that the folks in charge seem to think that it’s a brilliant fashion, merchandising and sales mind – Ms. Ahrendts – rather than a traditional McKinsey consulting type, who can help blaze Apple’s path to victory.
The intersection of business and fashion has existed since the dawn of the garment industry. At the end of the day, sophisticated management techniques drive success for brands just as much as a Slimane’s aesthetic prowess or a Ralph Lauren’s lifestyle empire-building. What’s striking about the current trend of fashion executives taking the helm outside of their traditional realm is that the opposite strategy – giving more traditional consumer goods or electronics mavens the power to run fashion companies – has proven to fail repeatedly. The debacle at JC Penney, which Apple exec Ron Johnson effectively ran into the ground, is just one example of this. Yet when it came time to pick Ms. Ahrendts successor at Burberry, the label surprised the world by appointing creative director Christopher Bailey to the post.
An overarching theme here is that creative vision can not only walk hand-in-hand with top-level business strategy, but also that the former actually enhances the latter. Bailey is anything but an artiste. His decisions as a designer – to reign in the over-saturated Burberry check and to expand aggressively into the digital space with The Art of the Trench, for example – frequently proved to enhance the brand’s bottom line.
Similar savvy decision-making has been on display in the larger house’s cruise collection shows. Aware of the importance of the growing global oligarchy, designers from Karl Lagerfeld to Raf Simons have leveraged the cruise “season” as a serious business opportunity as well as a bastion for self-expression by crafting elaborate shows that bring Fashion Week to an international target consumer. Chanel just staged its show in Dubai. Dior in Brooklyn. Louis Vuitton in Monaco. Dior Homme has even shown a Fall/Winter collection in Beijing. These spectacles are equal-parts exotic art exhibition and traveling trade show. Designers understand that in order to further endear their brand to niche markets with deep pockets, leaving the latest and greatest product in Paris simply isn’t an option anymore. They’re paid for executive decision making as much as they are for creative vision.
Fashion executives have to understand tight deadlines, develop insights about a core consumer base, keep VIPs happy, forecast trends, raise capital and manage expectations. It’s a business where diffusion lines from everyone from Derek Lam to Victoria Beckham help push income into the black. Yet artistic credibility has to be maintained in order to effectively translate a luxe aesthetic to a mass market. No consultant, accountant or lawyer can carry out this dilution of pure brand equity. Industry insiders do it with ease.
Case and point: Google has tapped Andrea Guerra to do exactly this for Glass. A product heralded by media and embraced warmly by the technorati, Google Glass is an entirely revolutionary concept with a decidedly frumpy look. For $1,500, many early adopters aren’t willing to scoop up such a clunky design. Mr. Guerra, CEO of Luxottica, has helped to remedy this situation by partnering his Ray-Ban and Oakley brands with Glass for future product development.
A creative executive who is constantly pushing for “fresher ideas,” Mr. Guerra’s friendship with ex-Mayor of Florence and current Prime Minister of Italy, Matteo Renzi, has him billed for a potential upcoming minister of the economy or industry. Perhaps the ascent of the creative class outside of the fashion industry has even larger repercussions to come.